President Joe Biden’s proposal to increase the capital gains tax rate to 44.6% for certain people — the highest rate in United States history — will likely be a “nothing burger” for the average crypto investor.
Matthew Walrath, the founder of CryptoTaxMadeEasy told Cointelegraph that Biden’s latest tax promises probably wouldn’t affect most people in crypto, even if they did end up being signed into law.
“For 99.9% of people, it’s a big, fat nothing burger because it’s essentially just a proposal.”
The suggested tax rate — as well as an additional proposal to impose a 25% tax on unrealized gains — has garnered massive attention across social media despite the information being public for more than a month.
The now widely-referenced 44.6% figure was introduced in a March 11 Department of Treasury explanation document which outlined that the figure would only come into effect if two separate proposals — one aimed at increasing the top ordinary tax rate and the other aimed at increasing the investment income tax rate — were approved.
“The proposal essentially says they want to raise the long-term capital gains tax rate for people earning over $1 million a year to 44.6%,” said Walrath.
“Really high-income earners could potentially — if this budget proposal goes through — face a much higher long-term capital gains tax rate. But for the most part, it’s unlikely that it’s going to affect the average crypto user.”
Echoing Walrath’s position, pseudonymous crypto accountant SqueezeTaxes said the backlash toward the proposal was just another “headline catfish” before breaking down what the proposed policies mean for U.S. citizens.
Squeeze explained that the proposals were centered around bringing the highest federal tax bracket to 39.6% as well as increasing the Net Investment Income Tax (NIIT) to a 5% rate. Combined the figure evens out to 44.6%.
“The average income earner will not be affected by this. Biden’s tax proposals are targeting high-income earners, at least $400k or more on one end, and $1 million or more on another end,” Squeeze told Cointelegraph.
According to data from crypto payment firm TripleA, the annual income for the average crypto investor internationally stands at around $25,000. This figure, however, includes income data from countries with lower average incomes than those in the United States.
Is Biden coming for unrealized gains?
Notably, Biden’s Federal Budget proposal also included a 25% tax on unrealized gains for ultra-high-net-worth individuals.
In an April 25 post to X, Bitcoin commentator Jason Williams described the 25% tax proposal as “insane,” adding that it could “singlehandedly crush the economy.”
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However, Biden’s proposed 25% tax targeting unrealized gains would only apply to individual taxpayers with more than $100 million in net assets, per a report from tax analysts at taxation advisory firm Grant Thornton.
“It’s the same with the unrealized capital gains tax rate. It’s for ultra-high-net-worth individuals. If it were to go through, it’s not going to affect pretty much anybody on Crypto Twitter,” Walrath jested.
Ultimately, Walrath said that Biden’s tax proposals could be seen as political “posturing” designed to curry favor with a lower-income voter base.
“It’s more of a posturing political play. The Democratic Party has kind of made an enemy out of wealthy people, and that’s one of the ways that they play to a low-income, low-education base.”
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